Under the COVID-19 pandemic, there are 6 major supply chain challenges and 6 major response plans

-The content of this article has been reprinted with permission from the @luke2323-

Supply chain logistics has evolved for nearly a hundred years, but supply chain disruptions in recent years have never been experienced by most shippers and customers. However, the shift from consumption to online retail, increased consumer confidence, pent-up demand and accumulated savings are all presenting huge opportunities for digital brands.

Recent challenges are undoubtedly overwhelming. Suppliers and manufacturers from all over the world have been put to a great extent, experiencing massive inventory shortages, delivery delays, and long backorders.

We expect supply chain challenges to continue to some extent for the remainder of the year – driven by increased consumer spending on products, continued demand for online shopping convenience, and catch-up to bottlenecks last year. Companies are adapting to these changes by addressing inefficiencies and seeking to be smarter, not harder to work.

6 major supply chain challenge in 2021

The COVID-19 pandemic continues to disrupt the supply chain ecosystem while creating unforeseen difficulties across the ecosystem. Here are the biggest supply chain challenges facing the world's largest product supply chains in 2021.

1. Shortage of supply

Underinvestment has been a concern since the COVID-19 pandemic began, as consumer demand has risen suddenly and unprecedentedly. Even now, with the limited supply of many parts and materials, companies and suppliers are struggling to meet this demand. When it comes to our growing brands, we run into a variety of issues, from furniture manufacturers facing a shortage of foam sponges, to carmakers with chip shortages, in fact, a recent survey conducted by the Institute for Supply Management (ISM) showed that "record lead times, widespread shortages of key basic materials, rising commodity prices, and difficulty in transporting products across industries." 

A brand's ability to sustain growth depends largely on its ability to work capital to safely weather downtime and cope with periods of peak season acceleration.

2. Shipping rates are high

Contrary to initial expectations, the demand for container transportation has increased significantly throughout the COVID-19 pandemic. As lockdown measures around the world spurred a surge in e-commerce sales, it led to an increase in import demand for raw materials and consumer goods for manufactured goods (a large portion of which was transported in sea containers). As this demand is much larger than expected, shipping capacity is insufficient and there is an unprecedented shortage of empty or usable containers.

As usual, this scarcity has led to soaring prices. Freight rates from China to the West Coast rose 240 percent last year, and freight rates on some routes rose more than a dozen times compared to usual.

3. Difficulty in forecasting demand

Demand forecasts during the global COVID-19 pandemic have taken supply chain management to a new level for many companies. The COVID-19 outbreak has fundamentally shattered predictions for countless retailers and consumer goods/service providers, leaving them unable to know how much inventory will be needed or how much inventory will be manufactured at any given time. As a result, the challenge comes from trying to improve forecasts of customer needs while in many ways having to rely on intuition rather than data-driven research.

In this context, we encourage supply chain managers to abandon bias, look for new data sets for predictive models, and continuously improve their results for maximum accuracy.

4. Port congestion

Port congestion caused by the pandemic remains one of the biggest challenges facing the world's supply chains, as port owners, carriers and shippers continue to work together to find viable solutions to the problem. Congestion occurs whenever a ship arrives at a port but cannot be loaded (or unloaded) because the port is fully loaded. While the loading and unloading process usually goes as planned, labor shortages associated with the COVID-19 pandemic have severely impacted capacity, creating major bottlenecks at some busy global terminals.

Because of this congestion and backlog, many companies are unable to ship goods out on time, which means that carriers are also unable to comply with their prescribed delivery commitments.

5. Consumer Experience

There have also been some significant changes in consumer attitudes and behaviors during the pandemic, such as lowering the threshold for delivery times, and the challenge is to have a flexible supply chain that can harness the power of automation to optimize fulfillment and easily handle accelerated demand. A good example of this supply chain flexibility comes from multi-channel order fulfillment services and inventory management software.

"The pandemic has pushed e-commerce demand to record highs. While the increase in order volume is a positive factor for merchants, new infrastructure needs and supply chain disruptions are our main focus and subsequent focus of our customers. An effective approach is to strengthen the management of relationships with customers, manage product forecasts, which is a defensive strategy for preventing negative experiences and maintaining brand integrity. ”

6. Digital transformation

When it comes to supply chain operations, digital transformation and the Internet of Things can be a mixed bag. However, there are several technologies that have the potential to improve the way we handle traditional supply chains, including: artificial intelligence, supply chain visualization, drones and robotics, electric vehicles, and on-demand delivery. However, while these systems/services are designed to improve the efficiency and cost-effectiveness of e-commerce processes in the long run, the challenge lies in how to implement them in the company's existing supply chain.

Implementing these technologies requires time and organizational adjustments, especially when using multiple warehouses or omnichannel selling. However, if the supply chain is to stay ahead of the competition, it must evolve.

Six measures to address supply chain challenges

As you know, this COVID-19 pandemic presents some unique supply chain challenges that ecommerce retailers continue to tackle every day. There are many ways to alleviate major problems and avoid running out of inventory again. While there is no one-size-fits-all, the combination of several techniques may provide relatively complete and comprehensive results.

Measure 1: Maintain the liquidity of enterprises

Protect your business with flexible funding channels. After all, having cash on hand can often meet the difference between demand and out-of-stock inventory. With inventories plummeting in the coming months, it's wise to consider a flexible line of credit that can be used to store high-demand goods in need of freshness and pay for priority manufacturing/shipping, or even air freight.

Measure 2: Diversify your supply chain strategy

Expand the scope of procurement, perhaps geographical scope, to increase the number of options and quantities in the supply chain. By developing multiple supplier relationships, supply becomes more flexible and adapts to changing markets (during the long-term COVID-19 pandemic that is transforming the entire global economy). Manytimes, diversification is the key to a brand's success because it stabilizes materials and supplies while maintaining profits, increasing customers, and fostering innovation.

Measure 3: Cooperate with reliable freight forwarders

Work with one or more freight forwarders to manage and track the shipment of goods. While freight forwarding companies are responsible for transporting products from one destination to the next, they can also schedule the entire process for shippers and negotiate the best price and/or fastest route. Retailers working with freight forwarders benefit from their extensive knowledge of the supply chain and their strong network, in addition to being able to deal with unforeseen obstacles such as cargo delays or service diversions in real time. What's more, freight forwarders are able to negotiate at scale by consolidating shipments from smaller retailers.

Measure 4: Find alternative ports of shipment

Hedge by looking for other ports to meet your fulfillment needs and complete them on time, regardless of the unexpected event or a sudden surge in customer orders. As many brands become increasingly dependent on Asian imports, sister ports in Los Angeles and Long Beach have become cornerstones of trans-Pacific trade. Given that these ports account for more than 25 percent of North American seaborne traffic, it's always wise to have a backup plan in place in the event of congestion or other inefficiencies.

Action five: Use visualization tools

Supply chain visibility is important for anticipating and defending against supply chain risks, and good visibility provides improvements and remediation solutions to brands, shippers and shippers, and even carriers with sufficient time and measures, while providing valuable data for operations to analyze and predict.

For example, argus supply chain visualization solutions, which are currently popular in the market and provided by Trend Research Information, provide cargo tracking, schedule query, container truck tracking and major port operation plan query, which can effectively help supply chain colleagues improve visibility.

Ø Cargo tracking: According to the sea bill of lading number or booking number, keep abreast of the status and location of the goods, such as whether the customs release, whether the terminal release, whether to lift empty containers, whether to load, whether to unload and so on.

Ø Shipping company schedule: Enter any port of departure and port of destination, you can understand the information of all available ships in the world within two weeks, including the estimated departure time, estimated arrival time (ETD, ETA), estimated number of delay days, ship location, transit ship and co-cabin ship information.

Ø Shipping company schedule: Enter any port of departure and port of destination, you can understand the information of all available ships in the world within two weeks, including the estimated departure time, estimated arrival time (ETD, ETA), estimated number of delay days, ship location, transit ship and co-cabin ship information.

Ø Port terminal operation plan: accurately track the status and location of a certain cargo, understand the accurate arrival and departure time of the ship (ATA, ATD), accurately understand the status of single window customs clearance, and the status of boxes in major yards, etc

Measure Six: Improve demand forecasting

Undoubtedly, the best way to improve your predictions is to use automated tools to calculate these metrics. Ecommerce sellers are always looking for a balance between their inventory levels, warehousing costs, and customer needs to prevent out-of-stock or inventory shortages. With automated inventory alerts, forecasting tools, and cash on hand, merchants can stock with confidence based on forecasted product demand and/or sales. More importantly, prioritizing forecasting can simplify inventory counting and reduce additional overhead.

Supply chain management after the COVID-19 pandemic

Over the past year or two, companies of all sizes have had to re-engineer their operational strategies in the hope of improving their operational efficiency as much as possible and retaining their customer base. Against the backdrop of global crises and supply and demand difficulties, brands are somehow building resilience to shocks and repairing disruptions through supply chain transformation.

This COVID-19 pandemic has increased the need not only for supply chain optimization, but also for faster decision-making. That's why Gartner said: "By 2024, 50% of supply chain organizations will invest in capabilities that support artificial intelligence, full-process visualization, and advanced analytics." 

This means that the adoption of artificial intelligence, advanced analytics, automation, and supply chain visibility will become increasingly important for supply chain leaders in the coming years. Your business can and should take advantage of a variety of intelligent, automated, and visual technologies to achieve great results in everything from customer relationship management to bringing more visibility to the supply chain.

Lucas Zeng, a graduate of Beijing University of Science and Technology, MBA from the National University of Singapore, has worked in GE, Rolls-Royce, JCI, Whirlpool Supply Chain Department, dedicated to the freight forwarding industry and international supply chain field process automation, intelligence and visualization, AI+ software robot RPA, as well as the promotion and dissemination of digital supply chain, smart logistics, etc. (Wechat: One Six Three Eight Eight Eight One Nine Six Three)。